The issue originally came to light when senior public sector workers, including head of Student Loans Company, Ed Lester, were found to be operating through their own companies while working full-time and exclusively for a Government department or quango.
The resulting media furore led to the Government clamping down on this practice, amid concerns that legitimate freelancers might be caught in the knee-jerking reaction. The Cabinet Office put all Government Departments on notice to put their house in order and issued strict criteria for engaging freelancers or workers 'off-payroll'. (See: HMRC's business tests at heart of new rules for contractors - Shout99, Sept 2012)
Now the problem has boiled over again after media reports that more than 2,400 NHS workers, mainly bureuacrats, are being paid as contractors rather than receiving their salary directly from the public purse. It is also indicated that this could be the tip of the iceberg as only staff who earn more than Ł58,000 a year and have been employees for at least six months were investigated.
Freelancer group, the PCG moved to clarify the situation before, it claimed, vital NHS projects were put in jeopardy.
Chris Bryce, PCG’s CEO said: “Board members should be on payroll and there is no excuse for them not being so. However, to suggest every person operating under a Personal Service Company for more than six months is doing so illegitimately shows a fundamental lack of understanding of how projects are delivered to large organisations.
“The NHS is a huge and complex organisation and delivering important projects, on which lives depend, takes time. Often much longer than the arbitrary limit of six months I have seen bandied about in the media.”
The group also tried to clarify the situation when it comes to the amount of tax paid by people working as independent professionals and using a Personal Service Company.
Mr Bryce said: “As a business, Personal Service Companies pay corporation tax, which is set at 20 per cent. However, when the individual running that company draws their income down they are subject to further tax, just like any employee or shareholder would be.
“To suggest Personal Service Companies enjoy preferential treatment over any other business when it comes to paying their fair share of tax is quite frankly, rubbish.
“Independent professionals choose to deliver work to their clients through a Personal Service Company for the same reasons as any business large or small. It safeguards them from personal liability should anything go wrong.
“Delivering critical projects to a body like the NHS without that protection leaves the individual open to personal liability. You wouldn’t expect any other supplier to take this responsibility and it is unfair to do so of an independent professional.”
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Susie Hughes © Shout99 2014